Vedanta to Tata Steel: After volatile H1CY25, Nifty Metal Index may see brighter H2

Mint

4 hours ago

Stock Market Today: The Nifty Metal Index has been rebounding, having risen almost 5% in a week. After volatile H1CY25, hopes rise on recovery and better H2 led by improving base metal prices and strong demand for ferrous and non-ferrous. This has improved outlook for Vedanta Ltd, Hindalco Industries, Tata Steel, JSW Steel, and other metal stocks.
The base metal prices on the London Metal Exchange, or the LME, are rising. Among key factors that are leading to the rise are expectations of a rate cut in the US, leading to a pickup in economic activities. Among others, the geopolitical tensions leading to supply chain disruption and the weakening of the dollar index, or a weaker dollar, are fueling the rise in base metal prices, as per analysts. The progress on trade talks between China and the US further adds to optimism among investors. A pickup in China's demand is looked at in a positive light, with China being the largest consumer of commodities.
Meanwhile, geopolitical stress also means higher defence outlays for many regions in the world, and the same means higher consumption of all metals.
Even a 12% safeguard duty, imposed by the government recently on certain steel imports for 200 days to protect domestic steel manufacturers from import surges, hence remains positive for domestic manufacturers. The monsoons may impact steel prices in the near term; however, softer input prices may cushion the impact
The demand in India is rising, led by strong domestic growth. The infrastructure activities keep the demand for metals strong in the country. In addition, even the pickup in defence manufacturing is also aiding growth for metal demand.
The metal sector has already started seeing a rally driven by various factors, said Ajit Banerjee, President and Chief Investment Officer, Shriram Life Insurance.
The safeguard duty announced by the government has provided a much-needed guardrail sought by the industry, while benign raw material prices have helped in margin protection, which has reflected in the earnings of the companies, as per Banerjee.
In view of the trade- and tariff-related talks between China and the US, expected to get concluded favorably to both the nations, will benefit the Indian metal sector significantly, pointed out Banerjee. Apart from this, a pickup in the government and private sector capex in this financial year augurs well for the metal sector. With the fears of global recession receding and trade negotiations between the US and its major trading nations ending on a positive tone, it will bode well for the metal sector of India, said Banerjee.
The demand scenario for non-ferrous metals is expected to improve with declining LME warehouse stocks, higher defense outlays in Europe, and a recovery in the Chinese economy, said Antique Stock Broking. Steady crude derivatives, weaker caustic soda prices, and stable thermal coal costs will aid Indian non-ferrous companies, as per Antique.
Goldman Sachs has upgraded their 2H 2025 copper price forecast to $9,890 per ton from $9,140 previously, meaning that they expect the prices on the London Metal Exchange (LME) to continue rising. Over the next two months, Goldman Sachs expects LME copper prices to rise, peaking for the year at $10,050 in August, before falling.
The increase in outlook has been led by the ongoing US Section 232 copper investigation. This, as per Goldman Sachs, has continued to cause significant dislocation between LME (UK) and COMEX (US) copper prices. Significant over-imports of copper into the US have caused fears of a shortage in the rest of the world, despite the global market being in surplus, and have resulted in a blow-out in LME time spreads.
Analysts at Antique Stock Broking said that "spot non-ferrous metal prices (except zinc) have strengthened 1%–5%. Month on month (as well as on a six-month and year-on-year basis) amidst the ongoing tensions in the Middle East as fears of supply chain disruption, lower LME inventory levels, and a weaker dollar index aided sentiment. The Dollar Index has weakened 1% to 2% over the past three months to the current level of close to 98.
Antique maintains a buy rating on Hindalco and National Aluminium Company (NALCO) and hold ratings on Vedanta and Hindustan Zinc.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of Mint. We advise investors to check with certified experts before making any investment decisions.